Default is inevitable. Discuss.

ei.sdraob

It is very simple actually

The people will not stand by and watch their welfare, education and healthcare cut at the same time as 10 billion a year of debt is being paid out.

The calls for default will grow in proportion to the debt repayment being paid out and proportional to the cuts being taken.

Debt will breed resentment, resentment will breed anger, anger will lead to default.

fred252

ei.sdraob wrote: »

It is very simple actually

The people will not stand by and watch their welfare, education and healthcare cut at the same time as 10 billion a year of debt is being paid out.

The calls for default will grow in proportion to the debt repayment being paid out and proportional to the cuts being taken.

Debt will breed resentment, resentment will breed anger, anger will lead to default.

i've seen nothing in the publics reaction to this so far to suggest the irish people will not stand by and watch it happen.

Noreen1

fred252 wrote: »

i've seen nothing in the publics reaction to this so far to suggest the irish people will not stand by and watch it happen.

I'm not so sure of that.
People voted overwhelmingly in the GE for parties/Independents who promised to renegotiate the bailout.

The Irish people are waiting to see what their new Government can achieve, imo.

What is very clear, is that the electorate were deeply unhappy with the previous Governments performance. How they may react to any further failure (perceived, or otherwise) by a new Government remains to be seen - but I don't believe more broken promises will be accepted meekly.

I haven't noticed that people are any less angry since the 25th February.
The new Government will have to be seen to act in the interests of the Irish people for the anger to dissipate, imho.

ilovesleep

fred252 wrote: »

i've seen nothing in the publics reaction to this so far to suggest the irish people will not stand by and watch it happen.

Loads in my area, if they not unemployed already, are walking from jobs and going on the dole, including me. The irish taxpayers are being made fools off. We simply will not be exploited in any way.

hmmm

ei.sdraob wrote: »

The people will not stand by and watch their welfare, education and healthcare cut at the same time as 10 billion a year of debt is being paid out.

And after the chaotic default that SF/ULA are proposing, will de peoples be happy to see a 15 billion cut in public spending?

Idbatterim

the thing is I cant see how we can go on doing nothing effectively! I mean we cant go back to markets, we cant tell europe we want lower interest rate, longer repayment time and then do pretty much nothing to close the gap between national income and expenditure... If we aren't pulling our weight, why should they lend to us, given that the longer things are left long fingered, the less chance there is of them getting back their taxpayers money, ECB money etc back? For example with Greece, if Irish taxpayers money was going to prop up Greece, I would not want it lent, if they were unlikely to repay, i.e if they did not go anywhere near the reform required. In relation to Ireland, all of the the foretasted cuts and tax increases were based on figures that were too optimistic and already obsolete!

ei.sdraob

hmmm wrote: »

And after the chaotic default that SF/ULA are proposing, will de peoples be happy to see a 15 billion cut in public spending?

I dont know or care about SF/ULA position

The public expenditure/welfare will endup having to be addressed one way or another, default or no default.


The larger banking debts one the other will be resolved if we default (either partial or full, most likely partial) or by the EU/ECB taking that debt on (the opposite is happening now ECB debt is being replaced by Irish CB debt, 9 billion last month)

There will be a default, most likely partial on the banking debt,

a simple question for you

"how do you think the bondholders who invested in 'safe' Irish government bonds feel about the government taking on so much extra debt"?

Scofflaw

Idbatterim wrote: »

the thing is I cant see how we can go on doing nothing effectively! I mean we cant go back to markets, we cant tell europe we want lower interest rate, longer repayment time and then do pretty much nothing to close the gap between national income and expenditure... If we aren't pulling our weight, why should they lend to us, given that the longer things are left long fingered, the less chance there is of them getting back their taxpayers money, ECB money etc back? For example with Greece, if Irish taxpayers money was going to prop up Greece, I would not want it lent, if they were unlikely to repay, i.e if they did not go anywhere near the reform required. In relation to Ireland, all of the the foretasted cuts and tax increases were based on figures that were too optimistic and already obsolete!

How do you feel Greece is doing?

IRELAND WILL suffer no financial disadvantage through its €1.3 billion loan to Greece, Minister for Finance Brian Lenihan has told the Dáil.

He said the loan would be repaid as Greece’s economy improved and would not be included in the deficit because “it is classified as a financial transaction”. Mr Lenihan was speaking during the opening debate on the Euro Area Loan Facility Bill 2010, legislation to provide for the State’s contribution to the EU rescue plan for Greece and the stability of the euro. The legislation is expected to complete all stages by tonight. Mr Lenihan said that “member states’ funding costs are to be met in full.

cordially,
Scofflaw

dynamick

Ireland's cumulative probability of default in the coming 5 years is around 40% so if you believe that default is inevitable then that means you're smarter than the market and it's time to get rich quick by picking up the phone and ordering a bunch of CDS on Irish sovereign debt.

K-9

dynamick wrote: »

Ireland's cumulative probability of default in the coming 5 years is around 40% so if you believe that default is inevitable then that means you're smarter than the market and it's time to get rich quick by picking up the phone and ordering a bunch of CDS on Irish sovereign debt.

Given there record on Anglo and Irish banks, hmmmmmmmmmmmmmmmmmmm

Scofflaw

dynamick wrote: »

Ireland's cumulative probability of default in the coming 5 years is around 40% so if you believe that default is inevitable then that means you're smarter than the market and it's time to get rich quick by picking up the phone and ordering a bunch of CDS on Irish sovereign debt.

Sorry - is this the direct link to the report in question?

http://www.cmavision.com/images/uploads/docs/CMA_Global_Sovereign_Credit_Risk_Report_Q4_2010.pdf

cordially,
Scofflaw

hinault

In reply to the posters who suggest that the Irish public will not accept a decrease in the level of services while paying €10 billion per annum in interest,
I don't share their view.

From what I can gather, and this is more anecdotal than scientific I should add, people generally have no concept of the scale of the problem that the country faces.

€100 billion debt? €200 billion debt?
I don't think that either figure is tangible to the ordinary person in the street.

Edit : in answer to the OP question, I do think that default is inevitable. The only issue in my mind is whether or not the default is orderly (ie. an agreed default with bondholders) or disorderly (ie. where a unilateral decision is taken to default on bondholders). An orderly default is the most likely option.

View

ei.sdraob wrote: »

It is very simple actually

The people will not stand by and watch their welfare, education and healthcare cut at the same time as 10 billion a year of debt is being paid out.

Current spending levels are unsustainable. Either way there are going to be cuts. The only question is the severity of the cuts we want to inflict on ourselves right now. Either we cut everything in one go (the default now option) or cut over several years (we borrow to reduce the severity of the shock but pay for this over a longer time).

ei.sdraob wrote: »

The calls for default will grow in proportion to the debt repayment being paid out and proportional to the cuts being taken.

Debt will breed resentment, resentment will breed anger, anger will lead to default.

A week is a long time in politics. A 5-year Oireachtas term is an eternity in both the political and economic senses.

Nothingbetter2d

i'm all for defaulting

screw germany and france.

default, drop euro, reintroduce the punt and start all over.

Nothingbetter2d

personally i'd like to see Kenny give us a referendum on defaulting.

its our country not just Kenny's let the people decide.

dynamick

Scofflaw wrote: »

Sorry - is this the direct link to the report in question?

http://www.cmavision.com/images/uploads/docs/CMA_Global_Sovereign_Credit_Risk_Report_Q4_2010.pdf

cordially,
Scofflaw

I have an account with CMA Datavision. The report above is not that different from the numbers today:
Entity Name Mid Spread CPD (%)
Greece 997.60 56.57
Venezuela 1082.03 54.67
Pakistan 968.40 50.82
Ireland 605.96 40.64
Argentina 617.76 36.34
Portugal 500.63 36.12
Ukraine 455.79 28.35
Dubai/Emirate of 423.44 25.92
Iraq 368.00 23.27
Egypt 360.18 22.83

Also retail investors can't buy CDS.

Subordinate bank debt has already been defaulted on. Senior unguaranteed Irish bank debt is trading at a range indicating that a default is expected soon (>2500bps).

i'm all for defaulting

screw germany and france.

default, drop euro, reintroduce the punt and start all over.

This would result in an overnight halving of welfare rates and public sector pay. We would have cut off our trading partners and all our credit lines.

Laois_Man

dynamick wrote: »

This would result in an overnight halving of welfare rates and public sector pay. We would have cut off our trading partners and all our credit lines.

I don't accept this!!

I don't think too many people want to default on our soverign debt. In fact, I think most reasonable people wouldn't want to see a 100% default on the bank debt either.

Plus, as I have been stating all along, I firmly believe that the markets will be available to us again within less than a year if the bulk of this bank debt is off our backs! Is this totally in dispute by you?

ei.sdraob

Continually clumping together sovereign debt and bank debt is the reason for no one wanting to lend to us, the state is now toxic due to absorbing toxic banks.

Scofflaw

Laois_Man wrote: »

I don't accept this!!

I don't think too many people want to default on our soverign debt. In fact, I think most reasonable people wouldn't want to see a 100% default on the bank debt either.

Plus, as I have been stating all along, I firmly believe that the markets will be available to us again within less than a year if the bulk of this bank debt is off our backs! Is this totally in dispute by you?

If it were off our backs in a way that didn't involve burning those same markets, then I'm sure that would be the case. On the other hand, even under those happy circumstances, it would mean that there was no chance at all of getting our banks back on the market, which would leave them in their current zombie state, and quite possibly make them all entirely impossible to resurrect as privately funded concerns.

If on the other hand it did involve burning those same markets, then I can't see how anyone can realistically claim we'd be back in the markets within a year - where "back in the markets" means being able to issue sovereign debt at a rate lower than that available from the bailout facility.

cordially,
Scofflaw

dynamick

Laois_Man wrote: »

I don't accept this!!

I don't think too many people want to default on our soverign debt.

Is this thread not about sovereign debt default? Bank debt default has already happened and the markets are pricing in future defaults.

In fact, I think most reasonable people wouldn't want to see a 100% default on the bank debt either.

Defaults are rarely 100%

Plus, as I have been stating all along, I firmly believe that the markets will be available to us again within less than a year if the bulk of this bank debt is off our backs! Is this totally in dispute by you?

The bulk of bank debt is off our backs at this stage.

Only about 21bn of senior guaranteed bonds remaining:
http://uk.reuters.com/article/2011/03/02/ireland-centralbank-debt-idUKLDE7211JV20110302

The markets are not open because:

• the state is still spending too much compared to its income
• the press is full of talk of default an an easy option

professore

Scofflaw wrote: »

it would mean that there was no chance at all of getting our banks back on the market, which would leave them in their current zombie state, and quite possibly make them entirely impossible to resurrect.

In this scenario why do we need to resurrect them? Why not let them go? Something would fill the vacuum. We could have a temporary state bank adequately capitalised to provide basic banking services. The current banking system is not doing it's job now anyway despite billions being pumped into it.

Scofflaw

The markets are not open because:
[*] the state is still spending too much compared to its income
[*] the press is full of talk of default an an easy option

I do find it extraordinary that people ignore these two issues - as if the constant Irish media and political calls for default had no effect at all on whether the markets believed we were likely to do so.

As for the deficit versus the banks - we don't have any option but to reduce the deficit, and if we reduce the deficit the idea that we're able to cope with the bank debt becomes far more credible. At the moment our attempts to deal with the bank debt are not credible, because we're still going further into sovereign debt.

cordially,
Scofflaw

professore

dynamick wrote: »

Is this thread not about sovereign debt default? Bank debt default has already happened and the markets are pricing in future defaults.

Defaults are rarely 100%

The bulk of bank debt is off our backs at this stage.

Only about 21bn of senior guaranteed bonds remaining:
http://uk.reuters.com/article/2011/03/02/ireland-centralbank-debt-idUKLDE7211JV20110302

There are further holes to fill very soon in the banks.
We have borrowed to the hilt to recapitalise the banks already. This money has to be paid back so it most certainly is not "off our backs".

The state is still spending too much compared to its income

Agreed, however had we not had the banking crisis and the subsequent mismanagement thereof there would have been a lot more money available to give us time to sort this out.
Also debt servicing costs will make this problem much harder to solve in the future.

ilovesleep

dynamick wrote: »

Is this thread not about sovereign debt default? Bank debt default has already happened and the markets are pricing in future defaults.

Defaults are rarely 100%

The bulk of bank debt is off our backs at this stage.

Only about 21bn of senior guaranteed bonds remaining:
http://uk.reuters.com/article/2011/03/02/ireland-centralbank-debt-idUKLDE7211JV20110302

The markets are not open because:

• the state is still spending too much compared to its income
• the press is full of talk of default an an easy option

Our banks never defaulted. our ex government stepped in, tried to save the banks and in doing so tied banking debt to sovereign debt. this thread is very much about a sovereign default.

professore

Scofflaw wrote: »

I do find it extraordinary that people ignore these two issues - as if the constant Irish media and political calls for default had no effect at all on whether the markets believed we were likely to do so.

As for the deficit versus the banks - we don't have any option but to reduce the deficit, and if we reduce the deficit the idea that we're able to cope with the bank debt becomes far more credible. At the moment our attempts to deal with the bank debt are not credible, because we're still going further into sovereign debt.

cordially,
Scofflaw

How do you propose to reduce the €19billion deficit? I would be interested to hear your ideas. Halving public sector pay and social welfare might do the trick.

Scofflaw

professore wrote: »

In this scenario why do we need to resurrect them? Why not let them go? Something would fill the vacuum. We could have a temporary state bank adequately capitalised to provide basic banking services. The current banking system is not doing it's job now anyway despite billions being pumped into it.

That's a fair question - the answer is, in short, that the problem with winding up the banks is that it crystallises the banks' balance sheets, whereas the hope is to get the banks back on the market without ever doing that. Whether that's a credible hope is, of course, an open question!

One can look at the banks and say that the government has been doing little but kicking the can down the road. That's largely true, but there is a reason for kicking the can down the road - that between stress tests, recapitalisation, NAMA, and the rest, the idea is that at some point someone else comes along and starts carrying that can, or buys it off us outright. AIB and BOI remain fundamentally profitable banks with a dominant home market presence and good overseas subsidiaries. To whatever extent the markets can be convinced that they're at least reasonably sound, state support can be gradually withdrawn.

If on the other hand we crystallised the banks' balance sheets by winding them up, then we get to find out just how much of the banks' ECB debt they can repay - and because the ECB debt is state-guaranteed, we're on the hook for whatever of that can't be met from bank assets.

cordially,
Scofflaw

Scofflaw

professore wrote: »

How do you propose to reduce the €19billion deficit? I would be interested to hear your ideas. Halving public sector pay and social welfare might do the trick.

Is there a particular reason for ditching the IMF-agreed deficit reduction plan and substituting mine?

cordially,
Scofflaw

Laois_Man

I may be nieve, and I am not a qualified economist - but we have only drawn down about 30% of the "Bailout" (I hate that term) money to date. It makes me mad that a single penny of that money plus our own taxes have already been thrown into a black hole. I don't accept that we need to or should continue to do so with large chunks of the other 70% (and then some).

K-9

professore wrote: »

How do you propose to reduce the €19billion deficit? I would be interested to hear your ideas. Halving public sector pay and social welfare might do the trick.

The markets will punish us if we do that as well as it will affect growth and tax revenues.

There really is no quick fix here, it's going to take a long time to get back to normal markets again.

professore

Scofflaw wrote: »

If on the other hand we crystallised the banks' balance sheets by winding them up, then we get to find out just how much of the banks' ECB debt they can repay - and because the ECB debt is state-guaranteed, we're on the hook for whatever of that can't be met from bank assets.

cordially,
Scofflaw

That would be interesting ... pulling the fixtures and fittings out of Dail Eireann for a yard sale